Laptop e-mail cache tipped Apple to kickbacks scheme

Court papers filed by the U.S. Government and Apple against a former manager detail a scheme that allegedly saw confidential Apple data supplied to Asian electronics companies over more than three years in return for kickbacks of more than US$1 million.

The information gave the companies an edge over competitors when bidding for Apple's business and much of the allegations against the former manager, Paul Shim Devine, who was indicted on wire fraud charges last week. The information came from an e-mail cache allegedly found in Devine's laptop.

Devine joined Apple in July 2005 as a global supply manager was responsible for working with companies that supply Apple with parts and materials for the iPod and its headset. The job gave him access to confidential data including sales forecasts, pricing information and specifications for unreleased products, said Apple.

It was this data that Devine supplied to at least six Apple contractors in Asia, according to a federal indictment and a civil suit filed by Apple.

Devine appeared in court in San Jose on Monday where his lawyer, Raphael Goldman, indicated that he plans to plead not guilty. He remains in custody pending a detention hearing on Wednesday. U.S. attorney Michelle Kane said that Devine is a flight risk and should not be granted bail.

Apple's investigation into Devine began in April this year. It didn't say what prompted the probe, but Apple investigators discovered a Microsoft Entourage database of e-mails and a cache of Hotmail and Gmail messages on Devine's Apple-supplied laptop. The company took a copy of the drive and began working through its contents.

Apple said the e-mails contained details of payments, and the supply of confidential information that began in October 2006 with a Singaporean company called Jin Li Mould Manufacturing.

On numerous occasions Devine sent Jin Li information about its competitors that enabled the company to win business from Apple, the lawsuit said. In return Jin Li paid about US$1 million in commissions to Devine on Apple purchases, it said.

Jin Li declined to comment on the allegations when contacted earlier on Monday.

The payments were allegedly shared with Andrew Ang, an employee of Jin Li who Apple says took a commission of between 15 to 20 percent. The two kept track of their gains in a spreadsheet and coordinated meetings in Asia where Devine would pass payments to Ang, according to the Apple lawsuit.

Ang was also named in the federal indictment but did not appear in court on Monday.

Five other companies are named in the Apple lawsuit including Cresyn of South Korea, which has paid Devine $6,000 per month for "consulting services" since February 2007, according to an agreement between the two that was appended to Apple's complaint.

Apple says over the course of more than three years Devine passed Cresyn sales forecasts for unreleased iPod and iPhone models, product roadmaps, sales reports and details of problems being encountered by Cresyn's competitors.

Cresyn said it could not provide a comment on the lawsuit.

The risks involved in passing such information via e-mail were highlighted in a Sept. 16, 2008, message from Devine to Cresyn that said: "I received your e-mail on my Apple account. Please avoid using that e-mail as Apple IT team will randomly scan e-mails for suspicious e-mail communications for forecast, cost and new model information."

On another occasion Devine took images of his internal Apple e-mail and sent those images to Cresyn via Hotmail, Apple's complaint alleges.

The e-mails also point to steps taken to ensure payments did not attract the attention of banks or regulatory authorities.

Money was distributed into at least 14 bank accounts held in several names in countries including the U.S., South Korea and Singapore and typically in amounts of less than $10,000, Apple said.

"Please do not send the Sept. and Oct. payment together in one wire transfer. Anything over $10,000 wired could draw too much attention," Devine allegedly wrote in an Oct. 5, 2007 e-mail.

The payments did attract some attention from South Korea's Shinhan Bank, but not for impropriety.

"I met with a banker because they want to upgrade me to VIP member," Devine allegedly wrote in a Dec. 17, 2009, e-mail to China's Kaeder Electronics.

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